The Definitive Guide to Financing Solar

Let’s face it. Going solar can be complicated. There are several ways to pay for solar, each with its own advantages and disadvantages, so it’s sometimes difficult to know what’s right for your organization.

In this guide, we’ll look at the business case for going solar, discuss how SunPower financing services can support your organization, and help determine which financing option is right for you.

THE BUSINESS CASE FOR SOLAR

FINANCING SOLAR WITH SUNPOWER

GETTING STARTED GUIDE

The business case for solar

In today’s market, businesses face fierce competition, and public organizations are always on the lookout for ways to lower costs. They all want to reduce risk while increasing value.

To stay competitive, entities large and small across the nation are going solar. In fact, US solar adoption grew by 95% in 2016. That’s because, in addition to its clear environmental benefits, solar makes great business sense.

Solar adoption grew by 95% in 2016.

LOWER ENERGY COSTSEnergy costs businesses, on average, approximately 3-5% of revenue per year. For most organizations, that’s a substantial dollar amount. Savings from solar depends on several variables, but when a company can save 10% or more on their electricity bills, solar is a logical choice.

CREATE CUSTOMER VALUEA recent Nielson study on sustainability revealed that 66% of the people surveyed say they’re willing to pay more for goods and services offered by companies with visible green practices like solar. So going solar isn’t just good for the environment, it’s good for your organization’s reputation as well.

REDUCE RISKThe US Energy Information Administration forecasts energy prices to increase 5% by 2018, with the highest year-over-year increases since 2014. Over the past 30 years, retail electricity rates have risen 63% on average. In addition to lower energy costs, some forms of solar financing allow organizations to lock in a long-term fixed energy price. Power Purchase Agreements (PPAs), for example, can have terms of 5 to 20 years or more.

Solar is good business

Solar is more accessible

For years, solar has seemed out of reach for many businesses because of high initial cost, lack of capital or an inability to take advantage of solar tax benefits. But the steadily declining cost of solar equipment and installation, combined with tax incentives and new financing solutions, are accelerating solar adoption for organizations of all kinds.

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SunPower’s Financing Services

The expertise, integrity and solid track record you need to get your solar project financed.

New ways to pay for solar, like PPAs, mean that solar financing is now available to more types and sizes of organizations than ever before. However, solar financing can still be complex and challenging.

While the introduction of these new financial products have made solar energy more accessible, how do you determine which is best for you? Having a solar partner who understands how these models work can help you maximize the benefits of your solar investment over the long term.

That’s where SunPower’s unmatched experience in solar financing can help.

In your corner

Our financing team works for you. Since we’re an independent third-party facilitator acting in your best interest as a solar equipment manufacturer, we don’t profit from the financial arrangements we negotiate for you.

Instead, we arrange financing on your behalf with our network of trusted third-party financiers and investors, so you get the most favorable financing terms and the best long-term return on your investment.

When you finance your solar project with SunPower, you also get these exceptional benefits.

• ATTRACTIVE RATES

• LOWER RISK

• MORE CHOICES

• SEAMLESS EXPERIENCE

• LONG-TERM STABILITY

• SCALABLE SOLUTIONS

SunPower solar projects are some of the most attractive on the market. Our track record of high-performance, combined with our proven and consistent approach to project execution, helps to lower the cost of capital provided by our network of investors and financiers.

In return, your business gains access to more beneficial financing rates with lower execution risk and a faster and smoother process.

Attractive rates

COST OF CAPITAL

COST OF ENERGY

BETTER SYSTEM PERFORMANCE

TRUSTED PARTNER

You want the best financial terms for your solar projects, but sometimes a solar proposal may seem too good to be true. Unfortunately, when a proposal doesn’t come from SunPower, it is often too good to be true, leading to delayed or failed projects because reputable financiers see the project as too risky.

SunPower’s in-house financing experts know how to structure a “financeable” arrangement with attractive terms for solar buyers and acceptable risk for financiers.

In fact, we have a proven success rate in obtaining financial backing by top-tier financiers, and are responsible for over $10 billion in project financing.

Lower risk

$10 Billionin project financing completed

More choices

Some solar companies prefer their in-house financing because they take an equity stake. In contrast, SunPower evaluates your energy and financial goals and recommends the best option—one tailored precisely for your organization’s needs—without bias to any financing approach.

Whether you need to buy solar energy from a third party through a PPA or want to secure a loan to purchase and install your own customized rooftop, carport or ground-mounted solar array, including battery storage and more, we can model out a solution that’s the right fit for you.

FINANCING BATTERY STORAGE SunPower’s finance team arranges financing for battery storage-enhanced solar projects, giving you access to the best rates and tax incentives.

Seamless experience

Solar financing can be complicated. Less experienced finance teams leave you open to added costs and delays.

Our financial experts help you at every step, and we’ve streamlined the process with standardized documents and straightforward terms, so both energy buyers and financial investors know what to expect.

We pride ourselves on delivering the highest standards of service, which includes an unwavering commitment to transparency. Since we do not profit from the financial arrangements we negotiate, there are no hidden terms.

Long-term stability

It’s important to know that your financier will be around for as long as your solar project or purchase agreement, so SunPower only partners with trusted and stable financial institutions.

Prominent organizations like Wells Fargo, Bank of America and PNC view SunPower solar projects as sound investments due to our proven performance, integrity and efficiency. In addition, our financial backing by Total S.A.—one of the largest public companies in the world—gives financial investors greater peace-of-mind.

$10 0 MillionPPA credit facility with Wells Fargo Bank

Scalable solutions

We’ve helped secure financing for some of the world’s largest solar power plants, but we’ve also helped find innovative financing solutions for small family businesses, multisite commercial enterprises and public projects.

SMALL PROJECTSMost recently, SunPower has begun focusing on financing for smaller projects, an area that has historically been difficult to finance at rates that provide avoided cost savings due to outsized transaction expenses in relation to small project size.

LARGE PROJECTS Larger enterprise projects, including rooftop, carport and ground arrays, whether for single or multiple sites, have access to a full range of financial products.

Experts in public financing

Public entities, including government agencies and educational institutions, can often pay for solar systems through numerous financing options not available to typical businesses, including government-subsidized bonds, block grants, tax-exempt leases and special incentives.

We closely monitor all public financing options and can help your public organization source the most attractive funds to help get the highest returns from your solar project.

In fact, we have structured public financing with Qualified Energy Conservation Bonds (QECBs), Qualified Zone Academy Bonds (QSCBs), Clean Renewable Energy Bonds (CREBs) and municipal leasing programs.

The Exploratorium of San Francisco, a nonprofit science education organization, needed to understand the best solar financing solution for their new facility. “That’s where SunPower became our real partner,” explains Laura Zander, Chief Operating Officer at the Exploratorium. “They worked with us during every phase of the project, from initial pricing options to providing ongoing support. They really were the perfect fit for our needs.” Working with SunPower, the Exploratorium was able to purchase their solar panels outright. This proved to be a more cost-effective solution than a PPA for the nonprofit museum. SunPower also identified a number of state and federal initiatives that would help offset costs.

Getting Started Guide

Expert advice for financing your next commercial solar project.

Commercial solar financing is still a confusing landscape and a challenging process for most organizations to navigate on their own. We’re here to help you every step of the way. We’ll simplify the complex, keep you informed and streamline the process so you can be confident that you’re making educated choices and getting the right-fit financial solution for your needs.

We’ve pulled together some resources to help you get started. When you’re ready for the next step, SunPower’s experts will provide comprehensive solar financing services to structure and negotiate your solar project.

Should you own or finance?

Owning solar by paying cash or getting a loan typically offers the best long-term return on investment. This assumes you’re paying taxes and can take advantage of any available tax incentives. Leases or PPAs are good options if you cannot utilize these tax incentives, or don’t have much or any upfront capital.

Here’s a simple rule: If the energy buyer’s tax bill exceeds half the solar project cost, they may benefit by owning the system and paying via cash or loan. But if the energy buyer is a non-profit, a government entity or a commercial enterprise that pays no or few taxes, a third-party owned system financed by lease or PPA may be a better fit.

Direct Ownership Third-Party OwnershipOwner Customer Investor or Financier

Available Options Cash, Loan, PACE PPA, Lease

Impact on Energy Cost Depends on tax position and capital cost

PPA (Higher)Lease (Lower)

Upfront Investment High Low

Balance Sheet Impact Heavy PPA (Light)Lease (Heavy)

Customer Retains Tax Benefits Yes No

Performance Risk Customer PPA (Investor)Lease (Customer)

Renewable Energy Credits Optional Optional

Which financing option is best?

Figuring out the best way to pay for solar can be one of the more challenging parts of the process for businesses and other organizations who want to go solar.

There are three main financial paths to solar, each with its own considerations: cash, lease or PPA. Our in-house finance experts will work with you to assess your situation and then build a custom financial package that best meets your needs.

Cash Lease PPA

Ownership Direct ownership Third-party owned Third-party owned

Payment Upfront (or over-time depending on how cash purchase is financed)

Periodic (monthly/quarterly) rental payments Pay for kWh generated

Upfront Costs One-time cost None None

Accounting On balance sheet On or off balance sheet Off balance sheet

Use of or output from solar asset Lifetime of solar asset 15 to 20 years 10 to 25 years

Cash

The simplest path to financing a solar project is to purchase the system directly. You buy and operate the solar installation which allows you to directly benefit from any available federal, state and local solar incentives. If you have available capital and the tax appetite to absorb tax credits and accelerated depreciation, you may find a direct purchase via cash or loan to be the best option.

Greatest savings over timeYou realize the greatest total savings on energy costs with SunPower’s proven performance and reliability.

BENEFITS• Off balance sheet• Fixed energy costs• Reduced energy costs• No upfront cost of capital• Hedge against volatile electricity prices.• Project financier assumes power generation risk

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Average Retail Price of Commercial Electricity

Commercial Electricity rateLinear Commercial Electricity rate

PPA

A solar power purchase agreement (PPA) is a financial agreement where a solar developer builds a solar project on your property or somewhere in your region (called offsite solar) and then sells the electricity to you at a pre-arranged fixed rate that is typically lower than the local utility’s retail rate. The rate your organization pays is “subsidized” by the tax incentives retained by the project owner.

The solar project owner (financier) assumes the risk because you, the energy buyer, only pay for kilowatt hours that are actually produced by the solar system. Additionally, since your organization does not own the solar project, it is not held on the balance sheet.

Utility Energy Prices

SunPower PPA PriceSavings

Savings Over Time with PPAs

BENEFITS• No upfront cost of capital• Fixed energy costs• Reduced energy costs• Hedge against volatile electricity prices• Project financier assumes power generation risk

Attractive financing ratesYour organization gets access to attractive PPA rates with SunPower projects because our proven in-field performance lowers the financial investor’s risk and cost of capital.

Leasing

A lease allows an organization to rent a solar system in return for a regular fixed payment. The combination of known lease payments and lower utility bills typically leads to an immediate reduction in electricity costs and provides increased savings over time. At the end of the lease agreement (typically 15-20 years), you have the option to purchase the system, renew the lease or have the system removed.

Organizations with long-term procurement strategies can see higher savings with a lease than a PPA because of process efficiencies gained from standardized contracts and lower cost capital. Also, the project operating risk resides with the lessee, but it can be mitigated through performance guarantees and O&M services. Turnkey leases

SunPower can help you negotiate the terms of a solar lease with an expansive network of specialized leasing partners.

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Benefits of Solar Leases

BENEFITS• Little to no upfront cost of capital• Reduced energy costs• On or off balance sheet options

CASH • Offers greatest savings over time• Requires access to capital• Takes advantage of tax credits and

accelerated depreciation

PPA• No upfront capital required• Pay for only the power that’s generated• Lock in energy rates typically lower

than utility• Higher buyout fees than lease• No direct ability to take advantage of

tax and depreciation incentives

LEASE • No upfront capital required• Pay lease payment whether system

is working or not• Typically a savings over original

electricity bill• Lower buyout fees than PPA• No direct ability to take advantage of

tax and depreciation incentives

Which should you choose?

Each model has its own benefits and drawbacks to consider. For example, when you purchase a system, you have control over the equipment, but you need to account for ongoing operations and maintenance. When you lease your system, someone else usually takes care of maintenance and repairs, but you must make the lease payment whether or not the equipment is optimally producing electricity.

With a PPA, you’re not renting equipment, you’re buying electricity. Instead of buying electricity from your utility, you are buying from the PPA financier. You get a locked-in price that protects you from volatile energy price changes, and if the system doesn’t produce energy, you don’t pay for it. But if the system doesn’t produce the expected output, you will have to purchase remaining electricity needs from the grid.

© 2017 SunPower Corporation. All Rights Reserved. SUNPOWER, the SUNPOWER logo and DEMAND BETTER SOLAR are trademarks or registered trademarks of SunPower Corporation in the U.S. and other countries as well. All other trademarks are the property of their respective owners.

With more design, installation, and maintenance experience than any other provider in the country, SunPower offers the expertise, integrity and solid track record you need to get your solar project financed with attractive rates and lower risk.

Contact Ussunpower.com1-800-SUNPOWER1-844-289-7970